Captives continue to grow: Ways to seek to optimize your approach 

Marsh, the global specialist in captive management, recently published its annual Captive Solutions Benchmarking report, exploring these themes and more. Optimizing captives for the long-term is now top of mind for many organizations amid economic volatility, regulatory uncertainty, and emerging risks. But what do these trends really mean for your portfolios, and how can captives focus on strategic growth and resilience?

Despite a softening property market, captive annual premium continues to grow , as captive owners seek greater risk retention and broader coverage areas. Premium increases are being driven by capacity constraints, rate conditions, reinsurance pressures, and global trends. Notably, organizations are now looking to optimize captives for long-term use amid persistent political and market uncertainty.

In 2024, Marsh-managed new captives retained over 55% of the additional premiums they wrote, while large captives boosted their retentions by an average of 8%, compared to 2023. This trend reflects both harder conditions in parts of the commercial insurance market and a growing comfort among owners with taking on more risk themselves. Many expanded their risk portfolios, with established captives adding one or two new lines on average. Popular emerging or non-traditional coverages included cyber, Directors & Officers, trade credit, political risk, and supply chain coverage.

Non-traditional coverage gained momentum in 2024, with broader industry uptake fueling the trend. Premium growth surged across a number of industries but these four sectors: power and utility, food and beverage, automotive, and transportation. This was largely driven by demand for loss control, risk flexibility, and coverage stability. 

Key industries are writing more lines through their captives. Financial institutions have the most lines, writing an average of six different lines . The retail and wholesale industry, the third-largest captive industry sector, wrote an average of five lines, as did transportation. The highest limits were placed in cyber, excess liability, and property. Meanwhile, cells continued to grow in popularity, potentially offering a faster, more cost-effective route into captive solutions through quick set-up times, lower startup costs and capital requirements, and segregation of specific lines of business. 

For organizations already operating captives, a key next step is to unlock greater strategic value. This means exploring innovative ways to optimize costs, reduce losses, expand capacity, and better align risk with business objectives:

• Reassess current and future-state needs: A strategic review may help align captive operations with an organization’s goals by assessing current and future states and developing tailored plans. This often involves steps like risk diversification to seek to build surplus and support long-term risk financing. Working with specialist advisors may provide a smart path to optimizing your captive.
• Establish additional captive vehicles: Captives aren't just for tough insurance markets, but a strategic tool across cycles. Forming or expanding captives during calmer conditions may give owners more flexibility, stronger insurer relationships, and better positioning for future rate shifts and demonstrates a proactive approach to managing total cost of risk.
• Review asset allocation: As captives write more risk, grow in complexity, and retain more surplus, a review of the investment program may reduce opportunity costs. A focused, risk aware investment program supports future captive growth and may lower the total cost of risk to an organization.

Organizations may benefit from tailored insights from adopting a more flexible approach that may assist them to align capital, risk, and growth goals with liability-driven portfolio design and full balance sheet analysis. In our view, success depends on moving fast when opportunities arise, and partnering with a disciplined, transparent advisor can make all the difference.

In an environment shaped by economic volatility, regulatory uncertainty, and emerging risks, organizations are increasingly turning to captives as strategic tools for resilience and growth. Captive utilization and optimization continue to prove their value, supporting businesses to align risk management with broader strategic objectives. In response to today’s risk landscape, captive owners are writing more premiums, retaining greater levels of risk, and expanding into a wider array of coverage lines, demonstrating the growing role of captives in navigating complexity and driving long-term value. Strong investment programs may support this growth, allowing captive owners to seek to increase the sophistication of their risk programs.